Choosing a self-built or an intermediary platform for hosting winner-take-all crowdsourcing contests?

In practice, many firms launch winner-take-all crowdsourcing contests on a self-built or an intermediary platform to harness the wisdom of open crowds. In this study, we analyze the optimal choice of crowdsourcing mode for a contest seeker. Using game theory and auction theory approaches, we model a game between the seeker and participating solvers and derive the equilibrium decisions and payoffs under each mode. The results first show that on the self-built platform, the seeker benefits from controlling the number of solvers and providing the combination of monetary and non-monetary rewards, which meets the different preferences of solvers. Second, a large pool of solvers on the intermediary platform is not always beneficial for the seeker, such that a free-entry contest is less likely to be optimal. Moreover, some high-ability solvers will exert more effort but obtain less expected surplus when facing increased competition. Finally, we present conditions under which one of the two modes is optimal for the firm. Our findings provide firms with an appropriate mode in hosting the crowdsourcing contest.